Global debt watcher Standard & Poor’s Rating Services said Thursday the weak payment culture and rule of law threaten the stability of the Philippine banking system.
S&P said in the latest banking industry country risk assessment report that weak payment culture and rule of law resulted in inherently high credit risk for the industry.
Other weaknesses, it said, were low-income levels that constrained economic resilience and limited legal protection to supervisors and poor transparency in financial disclosures.
“The Philippines’ payment culture and rule of law are weak, and this has resulted in low efficiency in the legal system and caused significant delays and uncertainty in the recovery of bad loans,” S&P said.
S&P said the Philippines’ low income level remained a major constraint. It estimated that real GDP per capita would rise by 4.4 percent to about $3,000 in 2016 from 4.1 percent in 2015. GDP per capita is expected to grow by an average 4.6 percent over 2017 to 2019.
“Without the closure of infrastructure gaps and improvements in the business climate through regulatory reforms, the Philippines may not achieve lower-middle-income status in 2017, where per capita GDP exceeds $3,000,” it said.